Before the latest amendment to the Insolvency and Bankruptcy Code (IBC), an interim moratorium would kick in from the time an insolvency application was filed against personal guarantors. This prevented creditors from proceeding with recovery while the application was pending with the adjudicating authority.
Meanwhile, such a provision allowed these guarantors to resort to various tricks to delay the admission of the applications. To fix this, the amended law removed this automatic protection, requiring the IBBI to change regulations accordingly for its implementation.
In a discussion paper, the Insolvency and Bankruptcy Board of India (IBBI), has also proposed to insert an explanation, clarifying that creditors can continue or initiate such recovery proceedings that were pending as of May 26, 2026, when the amended law came into effect, as the interim moratorium is not applicable by virtue of the amendment.
The regulator also sought to tighten the regulation for the appointment of registered valuers for stressed firms, mandating the committee of creditors’ (CoC’s) approval for this. It also wants valuation reports to be kept confidential until resolution plans are obtained.
Registered valuers are currently appointed under by the resolution professional of a stressed firm without any involvement of the committee of creditors, despite valuation outputs being central to the committee’s evaluation of resolution plans, the regulator said in the discussion paper.
Further, there is no prescribed deadline for registered valuers to submit their valuation report, nor any standardised procedure for keeping the report confidential between submission and disclosure to the committee.
The regulator now seeks to mandate the registered valuers to submit their report in a sealed cover or secure electronic mode, by the last date for the receipt of resolution plans. The valuation report in the sealed cover will be opened before the CoC only on that same date, with confidentiality maintained until then.